Demonetisation crushes over Rs. 3,840 crore FMCG sales

Picture source: ThinkStockDemonetisation has hit the FMCG industry hard. And, its hope for a recovery after a good monsoon seems unlikely at present.

While FMCG companies had been witnessing cautious consumer spending, latest data from market researcher Nielsen shows sales of the industry have gone down by 1-1.5% or Rs 3,840 crore in November, compared to October. “While 1–1.5% net impact of demonetisation does not look huge, considering the size of the FMCG industry at Rs 2.56 lakh crore, this is a large drop in terms of absolute value,” said Nielsen.

And, the industry’s problems can become bigger. Data revealed that retailers are stocking goods lesser than ever before due to cash and supply constraints. Their purchase in November has gone down by 6.4% compared to October.

Purchase of personal care items such as toilet soaps, toothpaste and shampoo have seen the steepest decline by retailers. The fall in offtake is driven by urban India (-3.1% Nov vs Oct), while rural India has managed to stay flat at 0.4% mainly due to smaller packs, smaller currency transactions and a flourishing barter system.

Chemists could ride out the impact because they grew in rural areas, according to Nielsen, and were allowed to accept old currency until November 24.

On the consumer front, one out of five housewives reduced spending by 50% or more. While they have cut spends across categories (impulse as well as essentials), Nielsen expects a more cutback for impulse categories (biscuits/salty snacks) compared to everyday essentials (atta/rice/pulses/sugar).